Mumbai: Life Insurance Corporation of India(LIC), India’s largest domestic institutional investor, stepped in to support Indian equity markets over the past month-and-a-half as foreign funds headed for the exit doors, spooked by a tax row, concerns over corporate earnings and volatility in global bond markets.LIC has invested about Rs.11,000 crore on a gross basis and at least Rs.8,000 crore on a net basis in stocks since April, said a top official in LIC’s investment department.This was a period when foreign institutional investors (FIIs) turned negative on Indian equities, pulling the benchmark BSE Sensex down 10% from the intraday record high of 30,024.74 it hit on 4 March. Hopes of a timely onset of the monsoon and expectations of an interest rate cut in June by the Reserve Bank of India (RBI) have subsequently helped the index recover.Since 1 April, FIIs have bought a net of $764.64 million in equities. But they sold $2.34 billion in 17 of the last 21 sessions. On 21 April, FIIs bought $2.6 billion, partly on account of a large bulk deal as part of which Japanese drug maker Daiichi Sankyo Co. Ltd sold shares in Sun Pharmaceutical Industries Ltd to investors including Temasek Holdings (Pte.) Ltd.A row over minimum alternate tax levied on foreign portfolio investors by the income-tax department, the slow pace of corporate earnings growth and volatility in global debt markets were blamed for the sell-off.On Monday, the BSE Sensex closed at 27,687.30, up 363.30 points, or 1.3%. The NSE Nifty closed at 8,373.65, up 111.30 points, or 1.35%. The index is still down 6.72% from its lifetime closing high of 29,681.77, hit on 29 January.Potential losses in the Indian market could have been worse had domestic institutions like LIC not been net buyers of equities.To be sure, LIC was acting in line with its contrarian investment strategy—of buying when the market is falling and selling when the market is rising.The share purchases were purely to take advantage of attractive stock valuations rather than to prop up the market or limit the downside, the LIC official cited above said on condition of anonymity.“The Corporation’s investment strategy is to acquire and maintain quality assets that will meet the liabilities accepted by the Corporation. Our investment strategy aims to meet the reasonable expectations of the policyholders along with the safety of the funds,” said an LIC spokesperson.LIC was not the only domestic institutional investor (DII) buying Indian equities when foreigners were selling.Since 1 April, DIIs (including LIC) have bought equities worth Rs.19,764.03 crore as investors used the correction as an opportunity to buy stocks at more reasonable valuations.On 7 May, Mint reported that India’s market valuations had fallen below the long period average (LPA) of 10 years at the end of April. Based on an analysis of current valuations when compared with the LPA, India was among the most reasonable markets across major global bourses.This attracted domestic investors back to the markets.“India’s relative under-performance since March 2015 has been stark—India’s premium to MSCI EM (emerging market) Index has dropped to 25% even as other markets have rallied. We can’t predict the absolute bottoms, but there are compelling ideas to be bought into in this fall,” securities house Edelweiss Research wrote in an 11 May report.The perspective is shared by LIC which, in an emailed response to Mint, said that it remains “bullish” on the Indian markets.At present, the insurer is largely investing in long-term, stable, fixed-income securities and index stocks to maintain a healthy risk-reward ratio, said the LIC spokesperson, adding that the state-owned insurer believes in a balanced investment portfolio, depending on the opportunities in the market.LIC typically channels 15-20% of its total investments into equity. In fiscal 2015, LIC bought equities worth at least Rs.48,000 crore from the markets.According to Insurance Regulatory and Development Authority of India norms, an insurer needs to invest at least 50% of its investable surplus in government securities, at least 15% in infrastructure development projects and companies, and the remaining 35% across equities, mutual funds, non-convertible debentures, commercial paper, certificates of deposit, collateralized borrowing and lending obligations (CBLOs), money market instruments and a few other approved securities.According to data from the Life Insurance Council, which groups life insurers in India, the total value of equity assets held by 24 life insurers at the end of December 2014 was at least Rs.6.31 trillion, of which LIC alone owned equities worth at least Rs. 4 trillion.“Insurance companies, being in the business of selling long term products, are well-positioned to take exposure in equities during market corrections as they can take a view on possible returns over a much longer horizon than other investor classes in the market,” said Harshad Patil, chief investment officer, Tata AIA Life Insurance Co. Ltd, which has a portfolio of at least Rs.9,500 crore in equity assets through insurance policies. “So this time, due to the recent volatility in the market all life insurers got opportunities to increase their long positions in stocks. Also, since we are bullish on Indian markets and its growth prospects in the next 5-10 years, it is logical for us to enhance our exposure in equities. Apart from investments from funds in unit-linked insurance products (Ulips), which happens at policyholder’s discretion, this time we got opportunities to invest from funds under traditional products also,” he added.In its response, LIC said that it had no preferred sectors in which to invest its corpus.“There are company-specific opportunities in every sector and we continue to invest in such stocks on the basis fundamental strength and valuations of the company. We take our investment decisions on case-to-case commercial basis,” LIC said in its response.Since benchmark indices hit all-time intraday highs on 4 March, real estate, IT and capital goods stocks have fallen the most. The BSE realty, BSE IT and capital goods indices have fallen 14.33%, 11.16% and 11.16% respectively since then, while the Sensex and Nifty have fallen 5.76% and 6.2% respectively.“The swift and savage correction in parts of the market over the past few days provides more options for the medium term. Some good-quality growth stocks in the automobiles and IT sectors offer reasonable valuations now and we would look at accumulating these stocks at current levels,” said Kotak Institutional Equities in a research note dated 27 April.